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EXHIBIT 99.2
GREAT PLAINS SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed balance sheet as
of February 29, 2000 and the unaudited pro forma combined condensed income
statements for the nine months ended February 29, 2000 and for the year ended
May 31, 1999 give the effect of the acquisition of FRx as if it occurred on
February 29, 2000 for the purposes of the balance sheet and as of June 1, 1999
and June 1, 1998, respectively, for purposes of the income statements. The
unaudited pro forma information is based on the historical financial statements
of Great Plains and FRx, giving effect to the transaction under the purchase
method of accounting and the assumptions of adjustments in the accompanying
notes to the unaudited pro forma combined condensed financial statements.
On March 17, 2000, Great Plains acquired FRx by the issuance of
approximately 786,000 shares of Great Plains common stock and $12,250,000 in
cash. The value of Great Plains common stock issued in determining total
consideration in these pro forma statements was calculated using the average
Great Plains common stock price shortly before and after the announcement of the
acquisition of FRx.
Great Plains has a fiscal year end of May 31 while FRx had, prior to
being acquired by Great Plains, a fiscal year end of June 30. As a result, the
unaudited pro forma combined balance sheet includes FRx's unaudited balance
sheet as of December 31, 1999. The unaudited pro forma combined condensed income
statement for the nine months ended February 29, 2000 includes FRx's unaudited
income statement for the nine months ended December 31, 1999. The unaudited pro
forma combined condensed income statement for the year ended May 31, 1999
includes FRx's unaudited income statement for the twelve months ended March 31,
1999.
Great Plains' management has prepared the unaudited pro forma combined
condensed financial statements based upon the financial information of Great
Plains and FRx. The pro forma adjustments are based on estimates and assumptions
at the time of the filing of this Form 8-K that Great Plains and FRx believe are
reasonable. The fair value of the consideration will be allocated to the assets
and liabilities acquired based upon the fair values of those assets and
liabilities at the effective time of the acquisition. The estimates and
assumptions used for the allocation of assets and liabilities in these unaudited
pro forma combined condensed financial statements will be adjusted upon issuance
of the final valuation report.
The unaudited pro forma combined condensed financial statements are
presented for illustrative purposes only and are not necessarily indicative
of the financial position or results of operations which would actually have
been reported had the acquisition been in effect during these periods or
results which may be reported in the future. These unaudited pro forma
combined condensed financial statements should be read in conjunction with
the accompanying notes thereto and the audited and unaudited financial
statements and related notes of Great Plains contained in Great Plains'
registration statement on Form S-4 filed May 17, 2000 (SEC File No.
333-37188) and of FRx contained herein.
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GREAT PLAINS SOFTWARE, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
FEBRUARY 29, 2000
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
GREAT PRO FORMA PRO FORMA
PLAINS FRx ADJUSTMENTS COMBINED
------------ ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 28,092 $ 5,789 $ (12,254) (a) $ 21,627
Investments 63,564 63,564
Accounts receivable, net 30,473 3,616 (270) (b) 33,819
Deferred income tax assets 6,049 499 6,548
Other current assets 6,904 799 7,703
------------ ------------- -------------- ---------------
Total current assets 135,082 10,703 (12,524) 133,261
Property and equipment, net 40,362 1,671 42,033
Goodwill and other intangibles, net 94,398 77,839 (d) 172,237
Deferred income tax assets 3,113 319 3,432
Other assets 11,694 294 (5,000) (e) 6,988
------------ ------------- -------------- ---------------
Total assets $ 284,649 $ 12,987 $ 60,315 $ 357,951
============ ============= ============== ===============
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable $ 7,465 $ 301 $ (270) (b) $ 7,496
Accrued expenses 23,272 1,915 25,187
Deferred revenue 39,876 5,252 (1,651) (b) 43,477
Current portion of long-term debt
and capital leases 1,824 556 2,380
------------ ------------- -------------- ---------------
Total current liabilities 72,437 8,024 (1,921) 78,540
Long-term liabilities:
Deferred income tax liabilities 2,869 7,076 (d) 9,945
Long-term debt and capital leases,
net of current portion 6,608 579 7,187
------------ ------------- -------------- ---------------
Total liabilities 81,914 8,603 5,155 95,672
Mandatorily redeemable preferred stock 5,724 (5,724) (f) --
Stockholders' equity (deficit):
Preferred stock 6 (6) (f)
Common stock 165 59 (51) (f) 173
Treasury stock (124) 124 (f) --
Additional paid-in capital 181,322 324 59,212 (f) 240,858
Deferred compensation (311) 311 (f)
Accumulated other comprehensive loss (1,252) (1,252)
Retained earnings (deficits) 22,500 (1,294) 1,294 (f) 22,500
------------ ------------- -------------- ---------------
Total stockholders' equity (deficit) 202,735 (1,340) 60,884 262,279
------------ ------------- -------------- ---------------
Total liabilities and stockholders' equity $284,649 $ 12,987 $ 60,315 $ 357,951
============ ============= ============== ===============
</TABLE>
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GREAT PLAINS SOFTWARE, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR TWELVE MONTHS ENDED MAY 31, 1999
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
GREAT PRO FORMA PRO FORMA
PLAINS FRx ADJUSTMENTS COMBINED
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
License $ 79,685 $ 9,091 $ (2,305) (b) $ 86,471
Service 55,222 7,298 (719) (b) 61,801
------------ -------------- -------------- --------------
Total revenues 134,907 16,389 (3,024) 148,272
Cost of revenues:
License 19,355 116 (2,305) (b) 17,166
Service 18,350 4,574 (719) (b) 22,205
------------ -------------- -------------- --------------
Total cost of revenues 37,705 4,690 (3,024) 39,371
------------ -------------- -------------- --------------
Gross profit 97,202 11,699 -- 108,901
Operating expenses:
Sales and marketing 47,845 5,061 52,906
Research and development 19,486 5,349 24,835
General and administrative 11,080 2,561 13,641
Amortization of acquired intangibles 1,078 15,568 (g) 16,646
------------ -------------- -------------- --------------
Total operating expenses 79,489 12,971 15,568 108,028
------------ -------------- -------------- --------------
Operating income (loss) 17,713 (1,272) (15,568) 873
Other income (expense), net 3,592 (44) (613) (h) 2,935
------------ -------------- -------------- --------------
Income (loss) before income taxes 21,305 (1,316) (16,181) 3,808
Income tax provision (benefit) 8,520 (558) (1,660) (c) 6,302
------------ -------------- -------------- --------------
Net income (loss) $ 12,785 $ (758) $ (14,521) $ (2,494)
============ ============== ============== ==============
Basic EPS $ 0.90 $ (0.17)
Diluted EPS $ 0.86 $ (0.17)
Shares used in computing basic EPS 14,231,102 15,017,195
Shares used in computing diluted EPS 14,872,579 15,017,195
</TABLE>
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GREAT PLAINS SOFTWARE, INC.
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR NINE MONTHS ENDED FEBRUARY 29, 2000
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
GREAT PRO FORMA PRO FORMA
PLAINS FRx ADJUSTMENTS COMBINED
------------ -------------- --------------- --------------
<S> <C> <C> <C> <C>
Revenues:
License $ 75,766 $ 6,523 $ (1,712) (b) $80,577
Service 59,525 8,046 (1,255) (b) 66,316
------------ -------------- --------------- --------------
Total revenues 135,291 14,569 (2,967) 146,893
Cost of revenues:
License 18,927 122 (1,712) (b) 17,337
Service 22,054 4,694 (1,255) (b) 25,493
Amortization of acquired intangibles 284 -- 284
------------ -------------- --------------- --------------
Total cost of revenues 41,265 4,816 (2,967) 43,114
------------ -------------- --------------- --------------
Gross profit 94,026 9,753 103,779
Operating expenses:
Sales and marketing 45,396 4,795 50,191
Research and development 21,917 5,254 27,171
General and administrative 11,758 1,612 13,370
Amortization of acquired intangibles 2,585 11,676 (g) 14,261
------------ -------------- --------------- --------------
Total operating expenses 81,656 11,661 11,676 104,993
------------ -------------- --------------- --------------
Operating income (loss) 12,370 (1,908) (11,676) (1,214)
Other income (expense), net 4,257 35 (460) (h) 3,832
------------ -------------- --------------- --------------
Income (loss) before income taxes 16,627 (1,873) (12,136) 2,618
Income tax provision (benefit) 8,645 (751) (1,245) (c) 6,649
------------ -------------- --------------- --------------
Net income (loss) $ 7,982 $ (1,122) $ (10,891) $ (4,031)
============ ============== =============== ==============
Basic EPS $ 0.51 $ (0.25)
Diluted EPS $ 0.49 $ (0.25)
Shares used in computing basic EPS 15,639,805 16,425,898
Shares used in computing diluted EPS 16,356,893 16,425,898
</TABLE>
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GREAT PLAINS SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
1. Basis of Pro Forma Presentation
The unaudited pro forma combined condensed financial statements of
Great Plains have been prepared on the basis of assumptions relating to the
allocation of consideration paid to the assets and liabilities of FRx based on
preliminary estimates. The actual allocation of the amount of the consideration
may differ from that reflected in these unaudited pro forma combined condensed
financial statements after valuations and other procedures have been completed.
Below are tables of the estimated acquisition costs, estimated purchase price
allocation and estimated amortization of acquired intangible assets for FRx (in
thousands):
<TABLE>
<S> <C>
Estimated acquisition price:
Value of securities issued $ 59,544
Cash consideration paid 12,254
-------------
71,798
Deferred tax liability 7,076
-------------
Total $ 78,874
-------------
Estimated purchase price allocation:
Tangible and intangible net assets acquired $ 1,035
Goodwill 60,149
Non-compete agreements 2,520
Other identifiable intangible assets 15,170
-------------
Total $ 78,874
-------------
Estimated amortization of goodwill, non-compete agreements and
other identifiable intangible assets (based on amortization
period of five years)
For the twelve months ended May 31, 1999 $ 15,568
-------------
For the nine months ended February 29, 2000 $ 11,676
-------------
</TABLE>
2. Pro Forma Adjustments
(a) Adjustment to reflect the cash portion of the consideration paid for
the acquisition of FRx. The value of the Great Plains common stock
issued was calculated using the average Great Plains common stock price
shortly before and after the announcement of the acquisition of FRx.
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(b) Adjustments represent the elimination of intercompany activity between
Great Plains and FRx, including such items as accounts receivable,
accounts payable, deferred revenues, revenues and cost of revenues.
(c) Income tax expense adjustment is the result of a tax benefit equal to
40% of the lost interest income and recognition of the reduction of the
deferred tax liability associated with the amortization of the
estimated acquired identifiable intangible assets associated with the
acquisition of FRx.
(d) Goodwill and other intangible asset adjustments represent the
consideration paid in excess of the fair value of net assets acquired.
The allocation of the goodwill and intangible assets and the related
deferred tax liabilities are preliminary and the actual allocation
could differ when the appraisal by a third party is completed. In
addition, subsequent changes to the net asset/liability position from
the pro forma dates presented will have an impact on the goodwill and
acquired intangible assets and the related amortization.
(e) Eliminates the investment Great Plains had in FRx prior to the
acquisition.
(f) Adjustments to reflect the removal of the existing equity and replace
with the stock consideration provided for the acquisition of FRx. The
value of Great Plains common stock issued was calculated using the
average Great Plains common stock price shortly before and after the
announcement of the acquisition of FRx.
(g) Amount represents the amortization of goodwill and other acquired
intangibles related to the acquisition of FRx based on an estimated
life of five years. In addition, subsequent changes to the net
asset/liability position from the pro forma dates presented will have
an impact on the goodwill and acquired intangible assets and the
related amortization.
(h) Adjustments represent the interest income lost at an assumed investment
rate of 5% due to the cash paid for the acquisition of FRx.
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